AIA and PTAB Unconstitutional Under the Public Rights Doctrine

EDITORIAL NOTE: This article is the final installment of an 8-part series exploring the constitutionality of the PTAB under the public rights doctrine. To begin reading from the beginning please see: Patent Review in an Article I Tribunal is Unconstitutional.

___________

While the notion of emulating federal district court adversarial proceedings in an executive agency to determine patent validity has an analogy with other administrative agencies that deal with labor rights, health, environment, public safety and so forth, adjudicating patent rights in Article I tribunals lack a critical feature. Patent rights derive directly from the Constitution. Rights that are given by statute that deal with public health and safety may require an agency to review disputes. However, patent rights are critical private rights upon which the economy depends for its long-term progress. This special type of constitutionally embedded private right, the limited exclusive nature of which originates in the Constitution itself, may be adjudicated only in Article III courts.

The congressional experiment with removing review of patent validity to an Article I tribunal has had the adverse effect of destabilizing the patent right. These effects have harmed the incentives to invest in technology and the declines in technology investment have caused dramatic declines in productivity growth and aggregate economic growth. While the small technology companies have been harmed by the institution of the IPR regime, large technology companies have benefited by protecting remarkable monopoly profits.

Nevertheless, patent holders’ rights have been breached by the interference of the legislature and the executive branches on a private property right. The effect of IPRs can be seen as a form of taking of private property by the federal government. The beneficiaries of the takings are large technology corporations that get a free ride from low standards of patent validity tribunals and the losers are inventors and investors who lost the bargain of patent disclosure in exchange for limited exclusive rights.

Patents as Private Rights Have Historically Been Adjudicated in Article III Courts, Far from the Political Branches

Originally conceived to constrain a few overly broad patents that may have been improvidently granted, IPRs now routinely attack all enforced patents. The attack on the patent system derives from a false narrative of weak patent quality promulgated by the big tech cartel to propagate their monopoly profits and to constrain entry barriers for competitors.

Once Congress was persuaded by the massive lobbying power of the big tech lobby to perpetuate their commercial interests, the executive branch was employed to administer mechanisms to attack patent rights on behalf of the big tech infringers. The adversarial structure of IPRs appears to have integrated a new government mechanism to support big company infringers against small entities. Since the big tech corporation lobbyists wrote the AIA, this observation should come as no surprise. The AIA and PTAB procedures reveal the application of arbitrary government policies and procedures to benefit big companies with a bias against patent holders. In retrospect, it would appear that we have witnessed a hostile takeover of the economy by a tech cartel with a concerted campaign to defeat competition. Given unusually high cancellation rates, IPRs, and their threat, perversely emboldens infringers to infringe, an outcome that Congress did not contemplate. PTAB has an imprimatur of legitimacy, but, in reality, IPRs supply a mechanism for harassment under the mask of abuse of executive agency power. PTAB epitomizes the abuse of discretion in its applications of unfair procedures.

It is apparent that the IPR mechanism, administered by a biased or ideologically-driven executive agency, facilitated the largest shift of wealth from small entities and investors to a technology cartel in history. As a consequence, the effect on the U.S. economy in the last few years since the AIA was passed is among the worst performing in history, with a near zero productivity growth rate and very poor aggregate economic growth.

Congress is often susceptible to influence of commercial interests and the AIA illustrates the effects of these biases. However, the application of these political forces to the bedrock of the economy, viz., the patent system, undermines fundamental rights to inventors derived directly from the Constitution.

Article III Court Review of Patent Validity Ensures Stability of the Patent System

The Constitution has mechanisms to correct these mistakes. First, the separation of powers enables adjudication of patent validity in Article III courts, the long-time home of such disputes. Due process mechanisms seek to correct abuses of executive power. Far from being alien to the determination of separation of powers, the public rights doctrine lies at its heart, carving out careful exceptions to the rule of the proper forum for the adjudication of disputes. However, all interpretations of the public rights doctrine clearly show that without consent, due process or Article III court review, Article I tribunal adjudication is unconstitutional. As an example, the application of procedures by PTAB in IPRs clearly lacks the minimum due process standards.

Only Article III courts can provide a fair, neutral and unbiased forum for assessment of patent validity. For over two hundred years, patent validity, patent infringement and patent damages have been consolidated to be heard in federal district courts. Federal courts supply impartial judges that are immune from influence by the executive or legislative branches. Furthermore, federal courts supply jury trials that enable a fair application of due process rights in the hearing of a patent dispute. Patent validity review is only a single component of patent infringement cases and it is efficient to have this component of the matter reviewed in a single matter.

Even if the PTAB were to only institute IPRs after application of a very stringent bar by respecting the presumption of validity with a clear and convincing evidence standard, as advocated in Microsoft v. i4i, and only then applied the federal district court standards of procedures in the administration of IPRs, the PTO tribunals would still be susceptible to the political abuses that we have witnessed since PTAB’s inception that would tend to deprive patent holders of fundamental due process rights.

IPRs cannot be repaired. The PTO, as with any executive agency, is susceptible to political and commercial influence. Its appointments have a tendency to ideological abuse and bias. We have seen many instances of abuses of all of the elements of due process in PTAB. The IPR experiment has clearly failed. If PTAB seeks to emulate federal court adjudication, but with a glaring omission of due process components, then why not dissolve PTAB and restore all patent validity reviews to the Article III courts? This simple solution has the advantage of maintaining historical consistency. The separation of powers demands that all patent validity reviews be restored to the federal district courts.

Conclusion

This series has looked beyond the abnormally high numbers of PTAB invalidity results to explain the causes of these phenomena. The core problem with the PTAB is that IPR proceedings lack the fundamentals of due process. Consequently, according to the public rights doctrine, the PTAB’s application of IPR proceedings is unconstitutional.

Other series articles:

• Patent Review in an Article I Tribunal Under the Public Rights Doctrine (Tues. 10/3)
• The Classical Public Rights Doctrine: Growth of the Administrative State (Thurs. 10/5)
• The Modern Public Rights Doctrine (Tues. 10/10)
• Private Rights and the Sanctity of an Independent Judiciary (Thurs. 10/12)
• Separation of Powers Constrains of Patent Invalidation (Tues. 10/17)
• PTAB Procedures for IPR Fail to Satisfy the Tests for Due Process (Thurs. 10/19)
• IPRs unduly harm patent holders and benefit big tech infringers (Tues. 10/24)